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Lets say Podemos gets elected, they could close all Banks and call for a Referendum on leaving the Euro in 2 Weeks, or so? But I agree, it is not so clear how to actually implement b).

About a): Don't you think that any position but full commitment to the Euro would destabilize your financial system?

by rz on Mon Dec 1st, 2014 at 04:20:19 AM EST
[ Parent ]
About a): Sarkozy (and please don't take that as indicating my support for the guy) did briefly state a position of not being ready to stay at ANY cost.

It did not destabilise anything other than Merkel, who immediately softened her stance -probably the only time Sarkozy had any impact on Merkel.

As for Podemos, whether they can do it like that in Spain I don't know, but certainly they would at least need to campaign on a platform of leaving, and there are polls, so people would know if they are about to win. So hardly a stealth action...
In France, it would require either a referendum or convening both chambers and getting a supermajority. Again, not something you can do quietly.

You are ruling out a) on the argument of a destabilisation from a lack of total commitment, to then promote a much, much stronger "lack of commitment" - in fact, commitment to leaving. That seems slightly odd.

As for ignoring the rule 123, yes, I'm all for that, but I don't think it's enough in the long run if the ECB won't act as a proper central bank, and it does nothing (or at least very little) to remove the fundamental imbalance created by Germany not playing fair.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 1st, 2014 at 04:36:16 AM EST
[ Parent ]
"Rule" 123 will not be ignored, because the ECB cannot afford to open itself to successful legal challenges on it. The game is played on the interpretation. In February 2010 everyone lied through their teeth about the impossibility of buying sovereign debt in the secondary market. That was a deliberate stance to leverage market pressure to force a political agenda on Greece. They ended up buying bonds timidly later that year.

However, the ECB may start buying bonds in the secondary market again. Vicepresident Vitor Constâncio said as much last week:

We expect that within the time of the programme, the adopted measures will lead the balance sheet to return to the size it had in early 2012. We have of course, to closely monitor if the pace of its evolution is in line with that expectation. In particular, during the first quarter of next year, we will be able to better gauge if that is the case. If not, we will have to consider buying other assets, including sovereign bonds in the secondary market, the bulkier and more liquid market of securities available. It would be a pure monetary policy decision, buying according to our capital key, within our mandate and our legal competence.
You see in the last sentence he's pre-empting German protests of unconstitutionality.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 05:43:04 AM EST
[ Parent ]
In February 2010 everyone lied through their teeth about the impossibility of buying sovereign debt in the secondary market. That was a deliberate stance to leverage market pressure to force a political agenda on Greece.

You know, currently Jens "Worst Central Banker of the World"  Weidmann is going around and gives speeches where he basically argues that the ECB should not fulfill its Mandate, to force specific political decisions upon various European Governments! This should definitely be an issue in the political discussion.

by rz on Mon Dec 1st, 2014 at 06:49:45 AM EST
[ Parent ]
I agree, a lot of noise should be made about Weidmann. That it is not the case is a major part of the blame that can be apportioned to the various non-German Eurozone countries.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 1st, 2014 at 07:07:49 AM EST
[ Parent ]
Krugman is on the case :
What about resolving the problem of too little inflation in Germany? Very aggressive monetary policy might do the trick (although I wouldn't count on it), but German monetary officials are warning against such policies because they might let debtors off the hook.
by rz on Mon Dec 1st, 2014 at 09:33:55 AM EST
[ Parent ]
Why? Weidmann is nowadays a total outsider at the ECB.
by IM on Tue Dec 2nd, 2014 at 06:22:51 PM EST
[ Parent ]
Same reason you need to prosecute war criminals long after the war has stopped.

And let's be totally candid about this: Weidman's policies have killed more people than most of the successfully prosecuted war criminals from the Yugoslav wars.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 3rd, 2014 at 03:34:58 PM EST
[ Parent ]
  1. Because it is totally outrageous that the Bundesbank want to force its policy preferences onto other countries, by failing to fulfill its mandate.

  2. At present Jens "Worst entral banker of the world" Weidmann has little impact on the policy of the ECB, since it turned out that everything he says is total shit (inflation expectations are well anchored...not). But there is no doubt that he is still slowing down the ECB in adopting QE. Therefore attacking him makes total sense.
 
by rz on Thu Dec 4th, 2014 at 03:45:22 AM EST
[ Parent ]
Weidmann is going around and gives speeches where he basically argues that the ECB should not fulfill its Mandate, to force specific political decisions upon various European Governments!

This needs clarification. It is hard to imagine that he means PIGS should not be cutting public services, and I rather doubt that he is concerned that countries are not meeting inflation targets.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 10:34:14 AM EST
[ Parent ]
His concern is that certain countries are not implementing required reforms with enough alacrity, surely?
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Dec 1st, 2014 at 10:45:32 AM EST
[ Parent ]
Well, I am pretty certain he does not oppose 'austerity' measures as contingent requirements to ECB or Troika bailout measures.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 10:54:11 AM EST
[ Parent ]
What is unclear? In order to force PIGS to do what he wants, he wants the ECB not to fulfil its Mandate.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 1st, 2014 at 11:15:45 AM EST
[ Parent ]
A naive reader might assume that Jens has had second thoughts on the wisdom of enforced austerity - depending on how much they know about him.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 11:20:24 PM EST
[ Parent ]
After all, when I think of Germany, the ECB and the Troika I cannot avoid thinking of the influence over policy held by the Bundesbank and how it has used that influence self righteously to force austerity on the periphery. The devastation wrought by enforced austerity in the most outstanding and noteworthy result of its efforts to enforce its Mandate. Thus, when I read: 'Weidmann is going around and gives speeches where he basically argues that the ECB should not fulfill its Mandate, to force specific political decisions upon various European Governments!' my first reaction is 'WTF', not enforce its Mandate'? It is Germany's Mandate'> But of course he is simply being hypocritical. He must be referring only to such minor aspects of that Mandate as enforcing the minimum inflation requirements. (How long has it been since the Eurozone has had inflation equal to or greater than 2%?) Weidmann decides for himself and Germany which aspects of the EU and EMU agreements are to be enforced and which neglected while denying that right to others.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Dec 2nd, 2014 at 10:43:56 AM EST
[ Parent ]
The ECB is currently not fulfilling its mandate because its (self-defined) mandate is to keep inflation "below (but close to) 2% over the medium(-to-long) term" and it is failing on that score. The ECB should be reflating the economy, but it isn't.

That's what's meant by "Weidmann advocates not fulfilling its mandate".

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Dec 2nd, 2014 at 10:46:25 AM EST
[ Parent ]
Indeed. And that is certainly not a minor point.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Tue Dec 2nd, 2014 at 04:20:45 PM EST
[ Parent ]
Sorry, sloppy writing.

I meant to say (but indeed said something else entirely) that I was all for ignoring constraints of the SuicideStability and Growth pact, but that it would not be enough in the long run because of article 123, or at least the way it is being interpreted.

Ignoring deficit limits would only take us so far economically, although politically it might infuriate the Germans enough to make them leave, which would markedly improve things of course.


Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 1st, 2014 at 07:05:22 AM EST
[ Parent ]
Individual countries could threaten add alternative currencies/payment systems, subject to capital and exchange rate controls, in parallel to the Euro and just ignore any protests. They should actually set in motion the process with public discussion on the design of the currencies, etc. Were they to call them Franc, Lira, Peso, Drachma it would make the message clear: the ECB is allowing 25%+ unemployment and deflation in much of the EuroZone so we are going to do something about it.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 10:46:46 AM EST
[ Parent ]
Not to forget that national currencies existed in parallel with the euro between 1997 and 2001.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Dec 1st, 2014 at 11:15:28 AM EST
[ Parent ]
More like 1999 and 2001 but the exchange rate was fixed already. I would expect that control over the issue of national currencies was already transferred to the Eurosystem in 1999.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 11:36:27 AM EST
[ Parent ]
Right.

Euro - Wikipedia, the free encyclopedia

The currency was introduced in non-physical form (traveller's cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the eurozone) ceased to exist independently. Their exchange rates were locked at fixed rates against each other. The euro thus became the successor to the European Currency Unit (ECU). The notes and coins for the old currencies, however, continued to be used as legal tender until new euro notes and coins were introduced on 1 January 2002.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Dec 1st, 2014 at 12:00:39 PM EST
[ Parent ]
Ah, fantastic...

This is the Maastricht treaty (1992):

Article 105a

l. The ECB shall have the exclusive right to authorize the issue of banknotes within the Community. The ECB and the national central banks may issue such notes. The banknotes issued by the ECB and the national central banks shall be the only such notes to have the status of legal tender within the Community.

  1. Member States may issue coins subject to approval by the ECB of the volume of the issue. The Council may, acting in accordance with the procedure referred to in Article 189c and after consulting the ECB, adopt measures to harmonize the denominations and technical speci/ications of all coins intended for circulation to the extent necessary to permit their smooth circulation within the Community.
Lisbon treaty (2007):
Article 128

  • The European Central Bank shall have the exclusive right to authorise the issue of euro banknotes within the Union. The European Central Bank and the national central banks may issue such notes. The banknotes issued by the European Central Bank and the national central banks shall be the only such notes to have the status of legal tender within the Union.

  • Member States may issue euro coins subject to approval by the European Central Bank of the volume of the issue. The Council, on a proposal from the Commission and after consulting the European Parliament and the European Central Bank, may, adopt measures to harmonise the denominations and technical specifications of all coins intended for circulation to the extent necessary to permit their smooth circulation within the Union.
  • See the subtle and important difference?

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 12:05:58 PM EST
    [ Parent ]
    How did that happen? Did really anybody put this in to mean that parallel currencies should be legal?
    by rz on Mon Dec 1st, 2014 at 12:13:41 PM EST
    [ Parent ]
    They forgot that currencies other than the Euro could exist...

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 12:23:11 PM EST
    [ Parent ]
    Hoist on their own petard! It says nothing here about issuance of other currencies, such as Berkshire Bucks, or, indeed, such existing practices as Business Exchange dollar credits.

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 11:35:08 PM EST
    [ Parent ]
    A naive person like myself might ask how all these credit mechanisms, guarantees, etc. are not in themselves alternate currencies.

    Experience keeps a dear school, but fools will learn in no other. -- Dr Johnson
    by melvin (melvingladys at or near yahoo.com) on Tue Dec 2nd, 2014 at 02:02:29 AM EST
    [ Parent ]
    An alternate currency circulates.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Tue Dec 2nd, 2014 at 04:52:40 AM EST
    [ Parent ]
    In the USA BX operates nation wide. My brother exchanged the cost of chassis and alignment work for Tuscon and Pima County agencies for travel and lodging in various travel destinations, as well as treating us to some of the finer restaurants in Tuscon.

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Dec 2nd, 2014 at 10:07:02 AM EST
    [ Parent ]

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